In his latest, desperate attempt to change the subject from Obombacare, BHO is following in the slipstream of another economic ignoramus, the Pope, and pushing for an increase in the minimum wage. He evidently believes demand curves slope up, because he claims, via Twitter, that a 40 percent rise in the minimum wage will increase employment by 140K and increase GDP by $32.6 billion. Not $32 billion. Not $33 billion. $32.6 billion. That’s right, a forced rise in the wages of some individuals will somehow magically result in a rise in employment overall, and an increase in economic activity.
Just how that would work is a mystery. My guess is that they are multiplying the rise in wages to those currently paid less than the new minimum wage of $10.10 times the number of hours worked (assuming no decline in that figure-which is bogus) times some magical Keynesian multiplier times some jobs/GDP ratio to get the 140K jobs and the $32.6 billion GDP increases. The multiplier step would come from (presumably) the higher earnings translating into higher spending which raises the income of others who spend more and on and on.
But as Steve Landsburg rightly points out, when criticizing someone who should know better, even overlooking the highly unlikely assumption that the higher wage does not reduce employment, the higher income of those earning the higher minimum wage is a transfer from those who pay it. So even if you believe in magical Keynesian multipliers, there’s nothing to multiply. The income of some goes up, the income of others goes down by the same amount, so even if the consumption of some goes up the consumption of others goes down by approximately the same amount. Meaning the Keynesian spiral (if you believe in such things) never gets started.
In other words, if this sounds like an economic perpetual motion machine, you’re right.
But maybe it would make sense if explained by an articulate spokesman. You know, like this: